Govt to raise Rs 9.4 billion in domestic debt through development bonds

Published On: September 16, 2023 08:28 PM NPT By: Republica | @RepublicaNepal

KATHMANDU, Sept 16: In yet another effort to raise domestic loans amid ongoing crunch in its financial resources, the government is issuing development bonds worth Rs 9.4 billion.

According to the Monetary Management Department of Nepal Rastra Bank (NRB), the bidding for these bonds started on September 15, while they will go into official issuance from Sunday.

These bonds, known as Bikash Bond 2086 'Ta,' will have their interest rate determined through negotiation. The maturity period for these bonds is set at six years.

NRB has outlined its process for determining the interest rate, where the rates proposed by bidders will be arranged from the lowest to the highest. The 'cut-off' interest rate will be established based on the allocated amount. All bidders will be able to access bonds at this rate or below, ensuring a uniform interest rate for all successful bidders.

Eligible entities for bidding of the bonds include banks, financial institutions, non-bank financial institutions, insurance companies, organized groups, and Nepali citizens. The bonds ensure high liquidity and can be used as collateral for loans.

Interest on these bonds will be paid semi-annually, with accrued interest subject to applicable taxes. Of the total issued amount, Rs 7.69 billion and Rs 1.36 billion have been allocated to competitive and non-competitive bidders, respectively. In proportion, the figures make 85 percent and 15 percent, respectively.

The bidders can apply for 50,000 units at minimum, while the upper limit should be maintained as the multiple of 50,000 units not exceeding the face value of issued bonds.

For participation in the bidding process, individuals and organizations can only join as competitive or non-competitive bidders. Notably, commercial banks, development banks, and finance companies licensed by the central bank will be excluded from participation as non-competitive bidders.

This move to raise domestic debt through development bonds is part of the government's strategy to secure funds for the current fiscal year. The NRB has already raised Rs 27.86 billion in domestic debt through development bonds issued earlier in the fiscal year, and this additional Rs 9.4 billion will further contribute to the government's financial initiatives.